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Disconnect on policy might cause conflicts

It used to be that former Agriculture Secretary Dan Glickman's legislative recommendations were “dead on arrival” when they reached the House and Senate Agriculture Committees. Republican majorities in both Houses during Glickman's six years in office gave short shrift to just about anything the Kansas Democrat had to say about farm policy.

That almost predictable reaction was expected to change now that the secretary of agriculture and the chairman of the House Agriculture Committee are from the same party. Or will it?

At press time, USDA officials were wrapping up its “principles” for the next farm bill. A spokesman declined comment on what those principles may entail, saying he expected them to be released in the next few days.

Some clues might be derived from earlier comments by J.B. Penn, undersecretary of agriculture for farm and foreign agricultural services, who is heading up the team drafting USDA's farm policy recommendations.

Penn, a senior vice president with Sparks Companies, Inc., prior to joining USDA, gave the opening address at USDA's annual Agricultural Outlook Forum last February. The topic: “How Well Has the 1996 Farm Bill Worked?”

The speech noted how politics has influenced the perception of the Federal Agricultural Improvement and Reform Act almost since it was signed. Its Republican authors steadfastly defended the law while Democrats blamed it for low commodity prices and other ills.

According to Penn, the political debate began to intensify prior to the 1998 mid-term elections as first Democrats and then Republicans talked about a farm economic crisis. Congress appropriated $5.9 billion in ad hoc disaster assistance that year, followed by $9.3 billion in 1999 and $7.1 billion last year Following the initial legislation, Penn said, a “disconnect” began to occur between low commodity prices and economic conditions on the nation's farms. “Low prices continued to persist — and FAIR Act criticism intensified,” he said. “Yet, acreage and output grew, land prices and cash rents increased and sector balance sheets strengthened.”

This seemingly incongruous development can be explained by the insulating effect of the marketing loan, high loan rates relative to the production costs of commercial-sized producers and the extra $22 billion in payments above those guaranteed in Freedom to Farm, he said.

The fact that commercial-sized farms were relatively unaffected by the crisis also meant that production increased in the face of negative market signals and crop surpluses continued to build.

“The resulting lower prices have been used as justification for more federal assistance, creating a cycle of increased payments, higher production, lower prices and more requests for assistance,” Penn noted. “The biggest question facing agriculture today is how to end this cycle.”

Just how USDA will address this question in its “principles” remains to be seen. But, calls for reductions in assistance are likely to run into formidable opposition in the House Ag Committee. In its Draft Farm Bill Concept Paper, (see story on Page 1) the committee outlined a new mechanism that would provide more farm payments when commodity prices are low.

How the committee's proposals will square with USDA's principles should provide for interesting reading as the committee works to meet its Aug. 3 deadline for a new farm bill.